Quantum Computing Inc. 10-K Summary

Business Overview Quantum Computing Inc. (QCi) is pioneering the future of quantum technology, striving to make its powerful capabilities practical and accessible for real-world applications. Based in Hoboken, New Jersey, QCi leverages integrated photonics and non-linear quantum optics – essentially, manipulating light particles – to develop advanced solutions. Its core offerings span quantum computing, machine learning, remote sensing, imaging, and cybersecurity.

Core Technology and Differentiators: QCi's key innovation is its development of quantum systems that operate at normal room temperature and consume minimal power. This approach sharply contrasts with most other quantum technologies, such as superconducting or ion-trap systems, which require extremely cold, complex, and expensive environments. This room-temperature capability offers a significant competitive advantage, enabling broader adoption and easier integration.

The company's flagship product, the Entropy Quantum Computer (EQC), solves complex optimization problems by identifying the best possible solution from numerous options. The EQC utilizes QCi's proprietary photonics technology and can be installed in standard server rooms without specialized cooling or shielding.

Financial Performance For the fiscal year ended December 31, 2025, QCi made significant operational progress and invested heavily in its foundational technology. While its financial performance reflects an early-stage, high-growth trajectory, key highlights include:

• Revenue Growth: QCi reported $8.5 million in revenue, a 150% increase from the previous fiscal year. This growth was driven primarily by early commercialization efforts and research contracts for its quantum sensing and computing solutions.
• Net Loss: Despite revenue growth, the company posted a net loss of $42.3 million. This loss stems from substantial investments in research and development (R&D), manufacturing infrastructure, and talent acquisition – all critical for future growth in this nascent industry.
• R&D Investment: R&D expenses totaled $28.7 million, highlighting QCi's commitment to advancing its proprietary photonics platform and expanding its product portfolio.

Risk Factors Investing in QCi involves significant risks inherent in an early-stage, high-technology company:

• Commercialization Risk: The quantum computing market remains nascent. QCi's technologies may not achieve widespread commercial adoption or generate substantial revenue.
• Funding Dependency: QCi currently operates at a net loss and expects to require significant additional capital to fund its R&D, manufacturing scale-up, and market penetration efforts. Inadequate funding could impede growth.
• Intense Competition: The quantum technology space is highly competitive, with well-funded players and rapid technological advancements. Maintaining its competitive edge is critical for QCi.
• Technological Obsolescence: The pace of innovation in quantum computing is extremely fast. QCi's technology could be superseded by alternative approaches or breakthroughs from competitors.
• Intellectual Property Protection: Protecting its proprietary integrated photonics and quantum optics technology is crucial. Failure to protect it could negatively impact QCi's competitive position.
• Supply Chain and Manufacturing Scale-up: Scaling production of specialized TFLN chips and quantum systems presents manufacturing challenges and creates reliance on specific suppliers.
• Talent Acquisition and Retention: Attracting and retaining highly specialized quantum scientists and engineers is a significant challenge in this niche field.

Management's Discussion and Analysis (MD&A) Highlights The following highlights key aspects of QCi's financial condition and results of operations, providing management's perspective on the company's performance and future prospects.

• Results of Operations: For fiscal year 2025, QCi achieved significant revenue growth, increasing 150% to $8.5 million, driven by early commercialization and research contracts. This growth was offset by a net loss of $42.3 million, stemming from substantial investments in research and development ($28.7 million), manufacturing infrastructure, and talent acquisition, reflecting the company's early-stage, high-growth strategy.
• Liquidity and Capital Resources: As of December 31, 2025, QCi reported $55.2 million in cash and cash equivalents and carried a moderate debt load of $12.8 million. While current liquidity appears adequate for near-term operations, the company expects to require additional capital raises within the next 12-18 months to support its significant R&D expenditures and scale manufacturing.
• Significant Events and Strategic Initiatives: Key operational achievements include completing the state-of-the-art "AZ Chips Facility" in March 2025, establishing a multi-year R&D partnership with a leading aerospace and defense contractor, and filing five new patents. Subsequent to year-end, in February 2026, the acquisition of Luminar Semiconductor, Inc. (LSI) for approximately $15 million in cash and stock represents a pivotal strategic move to achieve vertical integration and expand photonics capabilities. The company is also actively diversifying its product portfolio beyond EQC into LIDAR, Reservoir Computing, and Quantum Cyber Solutions.
• Outlook: Management's strategy for 2026 and beyond focuses on vertical integration, accelerated commercialization of its quantum solutions, and leveraging its TFLN chip manufacturing capabilities for external sales.

Future Outlook Looking ahead, QCi's strategy for 2026 and beyond focuses on vertical integration, accelerated commercialization, and continued R&D.

• Vertical Integration: The LSI acquisition is central to building a complete photonics and quantum optics ecosystem, from chip fabrication to final product delivery. This strategy aims to reduce reliance on external suppliers and enhance control over product development.
• Commercialization Focus: QCi will intensify efforts to transition its quantum solutions from R&D to commercial deployment, particularly for its EQC, LIDAR, and quantum cyber solutions. These efforts include expanding sales channels and securing more pilot programs and customer contracts.
• TFLN Chip Sales: QCi aims to leverage its AZ Chips Facility and LSI's capabilities to produce chips for its own products and become a custom TFLN chip supplier for other companies, diversifying its revenue streams.
• Market Expansion: QCi aims to penetrate new market segments, particularly in defense, logistics, and finance, where complex optimization problems and secure communication are critical.
• Regulatory Environment: QCi monitors evolving regulatory landscapes, particularly concerning export controls for advanced technologies and data security regulations, as these could impact its global market opportunities.

QCi believes its unique room-temperature, low-power approach, combined with its strategic acquisitions and manufacturing investments, positions the company for long-term success in the rapidly growing quantum technology market, despite the inherent risks and challenges of commercializing cutting-edge innovation.

Competitive Position QCi operates in a rapidly evolving and highly competitive landscape, facing competition from large technology companies (e.g., IBM, Google, Microsoft), other quantum startups, and traditional high-performance computing providers. QCi's competitive edge comes from its unique room-temperature, low-power approach, which offers a more practical, cost-effective path to quantum adoption compared to cryogenic systems.

The market opportunity for quantum solutions is substantial and growing rapidly:

• The overall high-performance computing market was valued at $39.1 billion in 2019 and is projected to reach $53.6 billion by 2027.
• The enterprise quantum computing market, valued at $1.3 billion in 2020, is projected to surge to $18.3 billion by 2030, growing at a rapid 29.7% CAGR.
• The market for TFLN devices, central to QCi's strategy, is projected to grow from $190.4 million in 2022 to an estimated $1.9 billion by 2029, a 39% CAGR. QCi believes it is an early mover in these high-growth markets, positioning itself to capture a significant share.